China in Africa - ECON 3510 – African Economic Development

V.11.D The Emerging Role of China in Africa
ECON 3510
Arch Ritter
June 10, 2014
Source:
Class notes.
China has emerged as a huge economic
presence in African countries:
1. Foreign Investment
2. Trade;
Including land acquisition;
3. Financier;
4. Assistance Donor
1. China’s Investment in Africa
Major new participants in resource sector
activity: China, India, and South Korea
Concentrated in oil, minerals and now land
for agricultural exports
Major volumes of direct foreign investment
Oil, minerals and agri. raw materials
dominate African exports to Asia (86% to
China in 2005)
See The Economist, “Out-Sourcing’s Third Wave,” May 21, 2009 and African
Development Report 2007. pp. 131-136
China’s African Investments
•
http://www.heritage.org/research/projects/china-global-investment-trackerinteractive-map
“Outsourcing's Third Wave“: Land Acquisitions
Source: The Economist, May 2009
2. Trade:
New phenomenon: Asia, especially China has
captured the production of labour intensive
manufactures for the world.
Has Africa been “marginalized” in the
“globalizing” trading system
Implementation of any development strategy
aimed at developing manufacturing may
pose difficulties especially with competition
from China,
Do past prescriptions regarding trade need
reconsideration??
China’s advantages:
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Industrious labor force;
Low cost labor;
Past emphases on human development
Relatively new industrial capital stock
Massive economies of scale;
Major agglomeration economies;
Undervalued exchange rate
(“cheating at the “globalization game”??)
Digression on “Agglomerative Economies” (in large
urban areas)
providing cost advantages of large urban scale to producers,
including
– Developed infrastructure generally;
– Lower transport costs for inputs and outputs;
– diversified range of all economic activities
– skilled labor pools;
– availability of necessary inputs, repair services,
etc.
– proximity to major domestic markets;
– government services and bureaucracy;
– financial institutions, educational institutions
– “amenities’ for citizens
Impacts of China’s “beggar-thy-neighbour”
under-valued exchange rate,
an unfair advantage
 in domestic African markets
 and in foreign markets that African
countries could be cultivating. ;
4. Development Assistance
China’s Impact on Africa:
On the positive side???
On the negative side???
China’s Impact on Africa:
On the positive side,
1. China has helped accelerate economic growth by
contributing to commodity boom due to higher
prices of oil and metals
2. Deepened trade and investment on a continent that
has been marginalized from flows of international
trade and global capital,
3. Investing in Africa's transport and education
infrastructure.
4. Given many Africans access to low-cost consumer
goods.
China’s Impact on Africa:
On the positive side,
5. Low-transactions cost way of doing business and
noninterference in countries' internal affairs
6, More competition regarding aid; increased
recipient countries' bargaining power with
donors.
7. Generous development assistance
8. Major new investment
China is contributing to the continent's economic
development and acting as a force for change in
Africa.
China’s Impact on Africa:
On the negative side: some challenges and
risks.
1. Chinese investment is based on capital-intensive
natural resource extraction with minimal
employment generation
2. China's influence on global energy demand leads to
increased energy prices for net oil importers in
Africa and a worsening of terms of trade.
China’s Impact on Africa:
On the negative side: some challenges and risks.
3. A New “Scramble for Africa’s Resources”?
4. Is China “de-industrializing” Africa?
Imports of cheap Chinese goods in Africa, plus
competition between Chinese and African goods in
third-country markets, hinders economic
diversification and manufacturing.
5. Allegations of
improper labor and human rights
standards, may gather momentum.
China’s Impact on Africa, continued:
On the negative side: some challenges and risks
5. Issues like corruption and governance, which had
moved to the forefront of the development agenda,
may slide back down again.
6. There may be some slippage in the progress with
regard to transparency and civil society participation.
China in Africa: Some References
Chinese-Built Ghost Town In The Middle Of Angola Read more:
http://www.businessinsider.com/chinese-built-ghost-town-kilamba-angola-20127?op=1#ixzz2yc1Qiu4R
China in Africa: The Real Story Digging into the myths and realities
http://www.chinaafricarealstory.com/2011/05/chinese-in-africa-economist-getssome.html
China Is Africa's New Colonial Overlord, Says Famed ... www.ibtimes.com/chinaafricas-new-colonial-overlord-says-famed-prim... Feb 18, 2014 - Animal activist and
researcher Jane Goodall compared Chinese investment in Africa to British colonialism.
http://www.theguardian.com/global-development/interactive/2013/apr/29/chinacommits-billions-aid-africa-interactive
Alex Vines, China in Africa: A Mixed Blessing?
http://www.relooney.fatcow.com/SI_Oil-Politics/Africa-China_22.pdf
Claire Provost and Rich Harris, China in Africa: soft power, hard cash, The Guardian,
29 April 2013
Land Grab and Human Rights in Ethiopia